Pages

Tuesday, October 23, 2012

More on Energy Independence

Daniel Yergin, an acknowledged expert on energy matters, is convinced that we can become energy independent in the U.S. relatively soon. If he's convinced, so am I.

By doing so, we'll also be able to create jobs, embark on a manufacturing resurgence, grow our tax revenues, materially improve our nation's economic performance and become a more safe and secure country in the process of doing so. Let's get going.

"An unconventional oil and gas revolution is under way in the United
States, but its full ramifications are only beginning to be understood.
The basic facts are clear enough. Half a decade ago, it was assumed that
the U.S. would become a large importer of liquefied natural gas; now
the domestic natural gas market is oversupplied, thanks to the ability
to produce shale gas through hydraulic fracturing and horizontal
drilling technologies. Shale gas alone is now 10% of the
overall U.S. energy supply. And similar technologies to recover
so-called tight oil trapped in rock formations are largely responsible
for boosting U.S. oil production by 25% since 2008—the highest growth in
oil output of any country in the world over that time period.

So far
more than 1.7 million jobs are the result . . . . These jobs include people working on rigs in Pennsylvania or North
Dakota, manufacturing equipment in Ohio or Illinois, and providing
information-technology services in California or legal services to
royalty owners nationwide. The number of jobs could rise to three
million by 2020. The energy revolution will add an estimated $62 billion
to federal and state revenues this year.But the energy revolution is having
other effects that get less attention. The balance of payments is one.
The increase in domestic oil production over the past five years will
reduce our oil-import bill this year by about $75 billion. The growth of
shale gas will save the U.S. from spending $100 billion a year on
imported LNG, which was the likely prospect five years ago. There is also a geopolitical dimension.
The increase in U.S. oil production since 2008 is equivalent to almost
80% of what was Iran's export level before the imposition of sanctions
on the Tehran regime.

Without the additional oil coming from the surge
in U.S. oil output, the Iranian oil sanctions could not have worked as
well as they have. Domestically, growing natural gas
supplies provide a foundation for a manufacturing renaissance, at least
for industries for which energy is an important feedstock or where
energy costs are significant. Chemical companies have been leaving the
U.S. for years in the search for lower-cost countries in which to
operate. Now they are planning to invest billions of dollars in new
factories in this country because of inexpensive and relatively stable
natural gas prices. The price of natural gas, which averaged $2.66 per
thousand cubic feet in the first nine months of this year, is less than
half of what it was five years ago.
This holds out a tantalizing prospect
that the U.S. could regain market share among the world's manufacturing
exporters. That prospect preoccupies companies around the world, from
Europe to China. When I was in China recently I heard much talk about
how China's historical advantage in cheap labor (which is becoming less
cheap) could in the years ahead be offset by cheap energy in the U.S.
We're also beginning to hear a debate
about the U.S. role as an exporter of liquefied natural gas....
Yet there are two points to be made
now. First, the scale of American LNG exports would be naturally limited
by the competition from other existing suppliers around the world, as
well as by new supplies coming from recent large gas discoveries
offshore of East Africa and Israel.

Second is a larger context. The U.S. is
successfully pushing Japan to reduce its oil imports from Iran, one of
its largest traditional suppliers. At the same time, Japan, still
reeling from the Fukushima disaster, is buying expensive LNG from both
spot markets and traditional suppliers in the Middle East and Asia to
replace nuclear power for generating electricity. How can America,
having asked Japan to reduce Iranian oil imports, turn around and
prohibit the export of surplus natural gas to this key ally?
The economic, political and even
geopolitical benefits of the energy revolution to the U.S. were not
foreseen at the time of the 2008 presidential election—but they are now
of clear importance. And the growing production of shale gas has led to
environmental controversy. . . .
The rapid growth of oil and natural gas
production represents a major opportunity for the U.S. Without these
energy resources, the disappointing economic picture would look worse,
and so would the jobs numbers."

Summing Up

We have the energy resources to become energy self sufficient in a few short years.

Now all we need is the will to develop these resources so we can grow our jobs and economy, create a U.S. manufacturing renaissance, increase our much needed tax revenues and in the end become a more safe and secure nation.